Tax departments keep a close watch on prices post GST rollout

Tax departments across the country are keeping a close watch on prices following the July 1 rollout of the goods and services tax (GST).

Makers of consumer goods and handsets, as well as some restaurant chains, have all got calls from local tax authorities seeking details of invoices before and after GST as part of the exercise.

“In order to study prices under the GST, you are requested to send selling price of your top commodity... in the relevant format,” read a notice sent to a company by local tax authorities in Tamil Nadu.

Similar messages have been sent to companies in states such as Maharashtra, Andhra Pradesh and Puducherry. Some have even got phone calls seeking price information, said a person aware of the development.

The government is keen to prevent any spike in inflation due to GST as happened in some countries that implemented the levy. India has opted for a two-pronged solution to make sure this doesn’t happen — a multi-rate GST structure and a proposed anti-profiteering agency.

The GST Council has tried to ensure that items are placed in slabs that are closest to the rate at which they were taxed earlier. The levy has four tiers — 5 per cent, 12 per cent, 18 per cent and 28 per cent.

Malaysia and Australia had put in place a mechanism to ensure prices didn’t shoot up after the indirect tax was implemented in those countries.

When industry had expressed concern that the anti-profiteering initiative may evolve into a modern-day inspector raj, it was assured that this wouldn’t be the case.

The government has so far maintained that the anti-profiteering provision is a deterrent and expects industry to pass on any cost reductions due to GST to consumers and not raise prices. Implicit in this was the assurance that investigations would be triggered by consumer complaints.

The latest move by tax authorities comes as the anti-profiteering framework is yet to be operationalised. Experts said it would be an added complication as companies seek to comply with new tax regime. ..

“These random enquiries by the authorities are not in line with the rules notified and lead to avoidable paperwork for companies at the time when they are trying to settle in the new tax regime,” said Pratik Jain, leader, indirect taxes, PwC.

“GST council should take a note of this and issue appropriate guidelines.”

The government is monitoring prices and the supply situation. More than 200 officials of the rank of joint secretary and additional secretary have been assigned four-five districts each to closely watch implementation.

Anti-Profiteering FrameworkRules empower a five-member National Anti-Profiteering Authority to order price cuts to the extent of lower taxes, impose penalties or even cancel registrations under the GST Act, effectively stopping the entity from doing business.

Besides that, a standing committee of nine members, consisting of state, central and GST Council officials, will examine complaints that will be passed on to the director general, safeguards, for investigation.

The proposed anti-profiteering authority will take the final call on whether a company has engaged in profiteering.

ET View:Trust Competition to Lower PricesThe intent to protect the interest of consumers is laudable. But it should not become a potential source of harassment for the industry that is switching over to the new tax regime, and needs easier compliance. The best way to protect consumer interests’ is to trust competition in the market place to set fair prices. Enabling easy entry and exit for all industries will foster competition. GST cuts out the cascade of many taxes that products had to bear, and would bring down prices anyway.